The proposed tax is discussed here. But it does not appear to have been adopted as law yet, and it would frequently be the case that the final tax legislation will differ greatly from the proposed litigation in most details relevant to a taxpayer. The legislation is subject to amendment before it becomes law at this point as I understand the situation (although there may be more recent developments of which I am not aware). The summary available at the link, which is probably from a press release of the government rather than proposed legislative language, is as follows:
India’s proposed tax rate on income from virtual assets is steep, but it signals that the government recognizes the country’s cryptocurrency industry, the CEO of crypto exchange CoinSwitch told CNBC.
In the Feb. 1 annual budget, Finance Minister Nirmala Sitharaman proposed a 30% tax on any income from the transfer of digital assets and said no deductions would be allowed.
Losses incurred from such transactions could not be set off against any other income.
India also planned to impose a 1% tax deducted at source, or TDS, on payments related to the transfer of digital assets.
Basically, this is a capital gains tax on cryptocurrencies and non-fungible tokens (NFTs), but with no deductions for cryptocurrency losses against another other than cryptocurrency income, together with a 1% sales tax on cryptocurrency transaction costs.
Consider this example:
You buy 800,000 rupees of Bitcoin and 200,000 rupees of limited edition online trading cards for celebrities like cricket players, Bollywood stars, famous pop singers, businessman, politicians, mathematicians, scientists and historical generals (which are non-fungible tokens) on January 1, 2023 for which you pay a broker 1000 rupees of processing costs, then on December 31, 2023, you sell the Bitcoin for 400,000 rupees and all of your NFTs for 1,200,000 because you get in a bidding war with Mukesh Ambani over his own NFTs, in transactions in which you pay brokers 1,400 rupees of processing costs.
You have a 400,000 rupee loss on the Bitcoin which reduces your 1,000,000 rupee gain on NFTs, for net digital asset income of 600,000 rupees, giving rise to a 180,000 rupee digital assets income tax. Also, you would pay a 24 rupee digital asset transaction excise tax (1%) for a total digital asset tax of 180,024 rupees.
For example if X person purchases software say MySQL commercial edition from YZX private limited and YZX Pvt ltd purchased MySQL commercial edition from oracle itself will this new 30% tax be applied on this transaction or not?
So it will look:
--> Oracle (produces MySql COmercial Edition) --> sold to a distributor --> sold to YZX Pvt ltd --> End user say X person
Now:
Q1. Will it be applicable for such software products also?
This tax is not intended to apply to software sales and sales of digital services.
Q2. What is it actually this tax on digital assets mean in current budget? Can anyone help me with brief details?
The government has an idea for raising new revenue and have put it as a placeholder until authorizing legislation is in place. But it isn't a law yet, as of February 3, 2022. It will probably take many months to pass a law enacting such a tax, if it happens at all.